چکیده انگلیسی

We find that monetary policy influenced Turkish bank lending between 1991 and 2007 through the money and bank lending channels. While capital and GDP growth have positive and significant long-run effects on bank loan growth, inflation, bank size and efficiency are not significant determinants. The latter is despite our finding that all Turkish banks’ efficiency improved over the period. Domestic banks are unexpectedly found to be more efficient than foreign banks. With no evident dynamics or fixed-effects in loan growth we prefer the pooled-OLS estimator. We caution against assuming fixed-effects and dynamics are present as this may adversely affect inference.

مقدمه انگلیسی

In last two decades, the Turkish economy has faced several financial crises that were caused mainly by poor macroeconomic conditions combined with a fragile banking system. Although the Turkish government initiated in the early 1990s structural, legal and institutional reforms banks’ balance sheets continue to be affected by the high percentage of non-performing loans (NPLs) for a detailed discussion see, for example, Alp and Elekdag (2011), Bakir and Öniş (2010), Ozkan-Gunay and Tektas (2006) among others. The banking sector has been the backbone of the Turkish economy and the Government realised that a sound and efficient banking sector requires an adequate macro- and micro-economic environment in which to operate, that will be consistent with, and help promote, the widening financial activities of commercial banks. Several research studies have recently been published on the performance and efficiency of the Turkish banking system, see, for example, Fukuyama and Matousek (2011), Ozkan-Gunay and Tektas (2008), Aysan and Ceyhan (2008), Demir et al., 2005 and Demir et al., 2007. Nevertheless, we identify a gap in current research on the Turkish banking system and monetary policy. In recent years there have been a large number of studies that try to explore the impact of monetary policy shocks on banks’ behaviour through the bank lending channel (BLC). See, for example, Kashyap and Stein (2000), Ehrmann et al. (2003), Gambacorta (2005), Balázs and MacDonald (2009), Matousek and Sarantis (2009), Brissimis and Delis (2009), Gambacorta and Marques-Ibanez (2011), Kishan and Opiela (2012), Brämer et al. (2013), among others.
This study contributes to this ongoing research by providing a detailed overview of the development of the Turkish banking system in the last twenty years. In particular, we analyse bank performance over the period 1991–2007. Such a long observed period allows us to capture the effects of the restructuring and consolidation process of the financial markets and to identify actual or potential problems in the Turkish banking system and individual banks. Such information is valuable in the process of further banking consolidation and restructuring. In addition, it contributes to the current discussion about the competitiveness and efficiency of the Turkish banking sector in the context of the EU enlargement process. If there is significant inefficiency among banks there may be room for structural changes, increased competition, mergers and acquisitions.
The paper contributes to policy makers and bank management by analysing the impact of the liberalisation and restructuring process of the banking sector in Turkey. Further, it provides policy recommendations for Turkey where significant challenges in banking consolidation remain.
Throughout the study we show the following: Firstly, based upon inference from our favoured pooled-OLS specification, that monetary policy has a direct impact upon bank loans in Turkey through the money lending channel. Secondly, we provide evidence that the BLC in Turkey depends on bank characteristics (liquidity and capital) which is consistent with recent empirical studies for transition economies, for example, Balázs and MacDonald (2009) and Matousek and Sarantis (2009). Thirdly, banks’ liberalisation and restructuring processes in the early 1990s and 2001 had the expected effect on the Turkish banking system in terms of improved performance (increased efficiency). This result contrasts with the findings published by Ozkan-Gunay and Tektas (2008), Demir et al. (2007), among others. Fourthly, we assess the hypothesis that foreign banks should be more efficient than domestic banks (Isik and Hassan (2002), Mercan and Yolalan (2000)). This hypothesis is in line with the results from transition economies see, for example, De Haas and Van Lelyveld (2006). Our findings are not consistent with this hypothesis, indicating that domestic banks are, on average, more efficient than foreign banks. Fifthly, we show that bank efficiency is not an important determinant in the BLC or of the growth of bank loans more generally in Turkey. Finally, we find that while there are dynamics in the levels of the data they are not evident in their first differences and so we do not favour inference from the Arellano and Bond (1991) estimator. We further find an absence of significant fixed-effects which suggests that our first difference specification likely removes any fixed-effects that are present in the levels of the data. Hence, we favour inference from the pooled-OLS estimator. We note that previous research on the BLC using panel data that assumes the presence of dynamics and fixed-effects in the first differenced data may not, therefore, be using the most appropriate estimators for inference. We suggest that future research in this area gives full consideration to the most appropriate estimator to be used in any particular application.
The paper is structured as follows: Section 2 reviews current studies on the BLC and bank efficiency. Section 3 outlines the estimation methodology and measuring cost efficiency in the banking industry. Section 4 discusses the results while Section 5 concludes.

نتیجه گیری انگلیسی

In contrast to much of the previous literature we find that it is not necessary to use the Arellano and Bond procedure to estimate a model of Turkish bank loan growth because the lagged dependent variable is never found to be significant. We note that in some applications of GMM to such models, for example Gambacorta (2005), the lagged dependent variable is not reported, hence, it is not obvious that this variable is required as a regressor in their application. Similarly, the lagged dependent variable is not significant in 19 out of the 42 (45%) regressions (for 6 countries) reported by Matousek and Sarantis (2009). Hence, the use of GMM may not be warranted in many instances in the literature.22 Indeed, we find no need to account for bank-specific fixed-effects and favour inference from the basic pooled-OLS estimator. We argue that neither a dynamic specification nor fixed-effects are required because our model involves differenced variables (in line with the existing literature) that are used to help induce stationarity and avoid spurious inference – differencing embodies dynamics and removes fixed-effects in the log-level of bank loans. Our results suggest that determining which estimation method is most appropriate is crucially important because it has a substantial impact upon inference. For example, including unnecessary dynamics by using the Arellano and Bond GMM method would, in our application, indicate that monetary policy has no direct impact upon bank loans through interest rates while applying the fixed-effects estimator would indicate that GDP growth is not significantly related to loans due to inefficient estimation. Hence, we suggest that it is important that authors report and check whether the lagged dependent variable is significant when applying the Arellano and Bond estimation procedure and test whether fixed-effects are required when using the fixed-effects method.
Our favoured model, estimated by pooled-OLS, suggests that, in the long-run, the growth in bank loans is related to monetary policy directly through the money lending channel (via interest rates) and indirectly (when liquidity and capital are interacted with interest rates) via the bank lending channel. Further, both capital and GDP growth have plausible positive and significant long-run effects on bank loan growth, whereas inflation, size and, in particular, efficiency do not have a significant equilibrium relationship with loan growth. Since there have not been other studies on the lending channel in Turkey we cannot provide any comparative evidence for this country. However, our results indicate the presence of a lending channel through interest rates. This finding is consistent with the results from other EU countries including CEEs. As for bank characteristics, empirical research across European countries is also quite inconclusive. Empirical studies from the standard market economies show that the role of bank characteristics like size, liquidity and capital in the lending channel varies considerably, see, for example, Ehrmann et al. (2003).
However, new empirical studies on the bank lending channel during the current global financial crisis period indicate that bank behaviour has changed. That is, banks that face financial distress, undergo a restructuring process and operate in an unstable economic environment respond differently to monetary shocks through the bank lending channel. Recent results, for example, Gambacorta and Marques-Ibanez, 2011, Olivero et al., 2011a and Olivero et al., 2011b among others, provide findings more in line with ours than to those of conventional research from the late 1990s and early 2000s. Empirical studies, in general, show that liquidity and bank size play a more prominent role in the lending channel. However, our results forTurkey show that the bank characteristics that play an important role in the monetary transmission mechanism are non-interacted bank capital and the three way-interaction term of the interest rate with lagged liquidity and lagged capital.
Bank size is a proxy measuring a degree of informational asymmetry. We find that the coefficient on this variable is not statistically significant for Turkey. Thus, the issue of informational asymmetry is not important in the Turkish bank lending channel over the analysed period. The bank characteristic bank liquidity that is used as a proxy of a bank's strength, is not significant when not interacted with interest rates, although it is significant when interacted with the interest rate and capital. Despite our finding showing that bank efficiency does not affect the growth of loans we do find unambiguous evidence that both the cost and profit measures of efficiency increased for all banks in our sample over the period 1991–2007. This is consistent with the notion that the liberalisation and restructuring processes that were introduced in the early 1990s and 2000s have had the expected effect on the Turkish banking system in terms of improved performance.
However, we did not confirm that foreign banks are, on average, more efficient than domestic banks as reported by Isik and Hassan (2003), Mercan and Yolalan (2000) or with other studies on CEECs, for example, Fries and Taci (2005), De Haas and Van Lelyveld (2006). Possible explanations of this inconsistency of results with previous studies include the following. Firstly, we cover a longer time period than previous studies on the Turkish banking system. Secondly, and most importantly, the results may be partially explained by the role and place of foreign banks in Turkey see, for example, Assaf et al. (2013). Although foreign banks started their operation during the 1980s their actual integration into the banking system was rather marginal. Their engagement with Turkish firms was a typical text book example of ‘cherry picking’ operations. Foreign banks served as bridge banks for their domestic clients wishing to operate in Turkey and they worked with the top “blue chip” Turkish corporations. Their full and proper engagement with domestic clients started only in the early 2000s. Since then we may notice an effort of foreign banks to be fully integrated and compete with domestic banks, that is, retail banking and other services that required them to build up an extensive branch network, attract new clients and recruit new employees. Therefore, foreign banks had to catch up with the domestic banks in terms of managerial skills that fit the local market, build up a new branch network and attract new clients in both the retail and wholesale markets. This definitely lowered their performance in terms of cost and profit efficiency in the early stage of their full operation.